I co-lead the Emergent China practice at Weber Shandwick, a public relations firm. We help Chinese multinationals as they enter global markets. I also lead our cleantech practice. I've spent nearly 30 years involved in China, and lived there for 15, during which time I was a foreign correspondent, a failed internet entrepreneur, a founder of a digital marketing agency and a partner in a film production company. Follow me @mrcleantech on Twitter.

Is China No Longer A Copycat?

Thousands of years ago, China was a center of invention and innovation – paper, gunpowder, the compass. The last 200 years? Not so much. Since opening up in the 1980s, China has built a reputation as a fast-follower and violator of Western intellectual property. In his upcoming book, “The End of Copycat China,” author Shaun Rein examines this negative perception and argues that things are starting to change. I connected with Rein via GoogleGoogle to talk China and innovation (maybe we should have used WeChat instead).

Brent: What industries are seeing the most innovation in China?

Rein: China is emerging as a global leader in mobile services and devices, and is gaining quickly in technology. Unlike in Silicon Valley where much innovation stems from start-ups, in China most of the innovation is coming from the larger, more established players like Tencent (notably with their WeChat services) as well as Alibaba. There are two major reasons for this difference: first, these firms can bankroll initiatives into new areas as early stage venture capital still in its infancy and until recently not really willing to back innovation and secondly, the government is more likely to grant licenses to larger, conglomerates that have shown in the past the willingness to toe the Communist Party line. It would be a mistake for investors and global brands to discount the innovation taking place — rising costs and squeezed margins mean Chinese companies are searching for new revenue streams and Wall Street is now giving higher valuations on publicly traded companies that are focused on innovation.

Is any disruptive innovation happening in China or is it all incremental?

Right now most of the innovation is fairly incremental, or what I call Stage 2 along the innovation curve in my upcoming book, “The End of Copycat China” where Chinese firms innovate for China specifically and focus on business model innovation rather than invention or disruptive innovation. With wide open space to develop as well as intellectual property concerns, it did not make sense to build brands previously, let alone focus on research and development. But that is changing as real profits are to be made by focusing on innovation and as the legal climate improves.

Name one recent, big, new invention that’s come out of China?

We need to define the difference between invention and innovation. It is true that in the past three decades Chinese firms have not focused on inventing new products and technologies — they were so many decades behind America and Europe in terms of technology that they took what worked in the West and made it relevant for China. They also focused on business model rather than technological innovation, such as how Chinese handset maker Xiaomi is selling online and looking to make profits on the back-end rather than on the upfront cost. Similarly, Steve Jobs at Apple did not really invent much — there were mobile phones and MP3 players long before the iPod and iPhone — what made Jobs brilliant was his ability to improve on the current offerings to meet unmet market demands. That is innovation at its finest and that is what Chinese firms are good at.

WeChat by Tencent is a good example. Telecom companies like China Mobile are slow moving and expensive. To overcome them, Tencent launched WeChat so people could communicate for free over Wi-Fi anywhere in China rather than send costly text messages or pay high roaming fees. Having cheap and mobile communication access in different cities was critical for migrant workers who would often move from city to city but did not want to pay high roaming fees (many phone numbers here charge more when calling outside of one’s home city). In many cases, the censorship and overly-burdensome regulations actually spur innovation rather than squelch it.

Is there ever going to be a Silicon Valley in China?

It will take decades or more before there is a true Silicon Valley in China because China lacks the ecosystem needed for widespread innovation. It does not have the Chinese version of Stanford, or the venture capitalists, bevvy of startups and lawyers. It is really hard to replicate that and the technology parks in China fall short as they are still too controlled by government entities. Although Premier Li Keqiang is pushing to make it easier for start-ups and other SMEs in China, the reality is that is hard to get funding and the government needs to streamline the bureaucracy more.

Most of the foreign venture capital firms have also not done particularly well in China unless they had a mainland Chinese person running point. Most have focused on copycatting Western models, a la Dang Dang as the “Amazon” of China, and bringing them to China where risk was perceived as being lower. Now that we have more Chinese venture capitalists setting up shop who are here for the long-term and truly know how to navigate China, there will be a more vibrant investing climate.

Cultural issues are often cited for China’s lack of innovation. Is this an impediment?

China’s education system remains terribly weak. Going into researching this book, I had thought that the weak education system would be a major barrier to innovation. When I interviewed entrepreneurs and venture capitalists, however, their responses surprised me. They said that innovation is led by a limited number of people, and therefore creativity can be achieved by the rare few who stay in China or who go to top universities in America and return. The education system is hampering companies from scaling and becoming global players but not to focus on innovation.

What will be the first three industries that will be dominated by Chinese innovation?

Chinese firms are leading in mobile device and services innovation. It is cheaper and easier to invest here than in other sectors. Some of the biotech and industrial innovation here is also quite remarkable. Jiang Mianheng, the son of former President Jiang Zemin, is launching an initiative to make a university in Shanghai rival Cal Tech. Massive money is being allocated to create state-of the-art research into biotech which incidentally, does not threaten security as high-tech might. Many of the greatest bounds in the world in biotech will stem from China.

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